What is a business tax return?

As the owner of a sole proprietorship, if your annual turnover exceeds DKK 300,000, you must inform the tax authorities of your business's earnings for the tax year. If your turnover is below DKK 300,000, you must inform the tax authorities that your turnover is below this threshold.

To provide this information to the tax authorities, you must complete an extended tax return for your business. This form is required to report both your personal income and your business's finances, including profits or losses, interest income, and expenses. The extended tax return provides the Danish Tax Agency with a clear overview of both your personal finances and your business's financial situation.

When you report your business results for a given tax year, the tax authorities use this information to determine your tax liability. If you do not file your business tax return, the tax authorities will estimate your expected profit and determine your tax liability themselves—and they don't always get it right. Therefore, we always recommend that you get it done.

Tax return or information form for sole proprietorships?

Many people are unsure whether it is called a tax return or an information form these days. But as we all know, a rose by any other name would smell as sweet. The confusion arose when the tax authorities decided to change the name of the tax return to an information form.

Today, it is called an information form for sole proprietorships, and when you visit skat.dk, it is the information form for your business that you need to complete. Even though the name has changed, the function of your information form remains the same.

"Information form for businesses" is perhaps more accurate these days, as filing a tax return has increasingly become a review of the figures already reported by banks. However, your business tax return is not filled out automatically, so it is important to remember that you are still responsible for providing the information.

Pay tax on an ongoing basis with your preliminary income assessment

The preliminary income assessment gives the tax authorities insight into your expected profit and is used to calculate your tax on an ongoing basis. If your profit or loss changes during the year, you can update your preliminary income assessment so the tax authorities have the most recent information, which helps ensure your tax is calculated correctly. This way, you avoid unpleasant surprises and tax arrears when it is time to file your tax return.

What deadlines should you be aware of?

When filing the extended tax return for your sole proprietorship, it is important to be aware of the relevant deadlines. The end of the tax year marks the starting point, and you have six months to complete the return, which means the deadline is usually July 1st. You can access your tax return as early as mid-March, so there is plenty of time to fill it out correctly and submit it on time.

If you miss the deadline, you will have to pay a tax surcharge, which is a type of fine for late filing. The surcharge is up to DKK 200 per day. 

If there are special circumstances that prevent you from meeting the deadline, you have the option to apply for a full or partial exemption from the tax surcharge. However, it is important to be aware that the Danish Tax Agency has very strict rules regarding when an exemption can be granted.

How do you file your business tax return?

To get your business tax return sorted, you need to gather your bookkeeping records and prepare an annual report. You need to do this because the figures in your annual report are the final numbers for the entire year, which you must report to the Danish Tax Agency (Skattestyrelsen). Once that is done, you have completed your business tax return.

Does that sound a bit too simple? We understand, and we are well aware that it sounds far too easy compared to what actually needs to happen in reality. But if we boil it down to the essence, that is how it is.

Special requirements for companies in reporting class A

If your company is subject to reporting class A, it means you are required to follow a standard that ensures your bookkeeping and annual report meet the legal requirements for your business type. This applies to the vast majority of sole proprietorships. It is important to be aware that there may be specific requirements and fields to fill out if you fall under this reporting class.

If you use our tool to prepare your annual report and tax return for your sole proprietorship, the tool will ensure that your accounts comply with legal requirements.

Read more about reporting class A here.

Which figures from the annual report do you need for your business tax return?

To complete your business tax return, you need to calculate two important results from your bookkeeping. As mentioned, you will find these figures in your annual report. The figures in the annual report consist of the income statement and a balance sheet.

The income statement shows whether you have made a profit or a loss during the financial year. The statement consists of your company's revenue minus expenses.

In addition, you must also calculate a balance sheet, which shows what your company owns and owes. The difference between what your company owns and owes is your equity.

These are the types of figures you need to enter into the various fields on skat.dk. The number of fields to be filled out varies. The number of fields you need to enter information into depends, among other things, on which tax scheme you are using.

Once you have calculated the figures, it is time to log in to skat.dk and get started with entering them. It is important that you read the field descriptions carefully so you do not enter your figures in the wrong places. Fortunately, the Danish Tax Agency is helpful. Most fields include a brief explanation so you can be sure before you enter anything.

We would also very much like to help you with your business tax return, and you can read more about how we can help you in a quick and affordable way in the next section.

Do you need help filling out your tax return and entering the figures into the correct fields?

Getting a handle on the numbers and preparing a business tax return can be quite a mouthful for most people who are not full-time professional accounting experts. Basically, it also requires a bit of skill to calculate the figures correctly.

Therefore, it is often a good idea to get professional accounting assistance. This is especially true if you are using one of the more complex tax schemes, such as the Business Tax Scheme (Virksomhedsskatteordningen), but we will go into more detail about that further down.

Calculate your figures on Reportability easily, affordably, and quickly

We want to help you calculate your figures and report them correctly to the Danish Tax Agency (Skattestyrelsen). That is why we have created a tool that makes you your own accountant and helps you prepare your annual report and tax return for your business.  

The tool is for those who want to learn more about taxes, save a penny or two on accountant fees, and handle their business tax return on their own.

How does it work?

It all happens in 5 easy and simple steps, which look like this:

Step 1 – Automatically transfer your bookkeeping to the tool
Step 2 – Answer a series of questions about your business and your accounts
Step 3 – The tool calculates your deductions and taxes
Step 4 – You receive a completed annual report
Step 5 – You receive a complete guide that tells you exactly what to enter in the tax agency's fields.

The tool ensures that you enter and calculate your figures correctly, and it is always updated with the latest legislation and developed in collaboration with state-authorized public accountants.

It takes no more than 20 minutes to prepare your annual report and business tax return on Reportability, and if you need help along the way, you can always chat with our accountants in the bottom right corner. If you click the button below, you can try the tool in a free demo version by creating a user, or you are welcome to read more about it by clicking the button next to it.

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How does the choice of tax scheme affect the completion of a tax return for sole proprietorships?

Your chosen tax scheme affects how many fields you need to fill out with the tax agency when preparing your tax return for your sole proprietorship.

If you use the standard personal tax scheme, you only need to inform the tax agency of the year's result. This means you must enter whether you have had a profit or a loss. Any profit must be taxed, whereas you can deduct a loss from your personal income. In addition to that, you also need to answer a few individual fields.

The personal tax scheme is by far the simplest method for taxes because there are so few fields to consider. With few fields also come few tax benefits.

However, you have the option to unlock further tax benefits by utilizing one of the other tax schemes, such as the capital return scheme or the corporate tax scheme. These schemes typically require more accounting work on your part, which is why it is a good idea to let a tool like Reportability handle it for you.

Your profit is taxed at 22% under the corporate tax scheme, which allows you to retain some of the profit at a lower tax rate. You must still pay personal income tax on the portion of the profit you withdraw for yourself. Furthermore, the corporate tax scheme allows for significantly higher deductions on your business debt.

The capital return scheme is an alternative to the corporate tax scheme and is generally easier to manage. This scheme taxes a capital return—a percentage of the business's profit—as capital income rather than personal income. This means you pay less in labor market contributions and potential top-bracket tax compared to standard tax rules. The capital return can, at most, equal the higher of either the profit from the business or the total negative capital income (excluding the capital return).

If you choose one of the other schemes on skat.dk, you unlock additional tax benefits that must be entered into several fields on skat.dk. The calculations become more complex, which is why it is a good idea to get professional help. Our tool can assist you with all tax schemes, so you don't have to worry about whether you have done it correctly or not.

File your business tax return before the deadline

If you have a sole proprietorship or a partnership (I/S), you are not required to submit an annual report to the Danish Business Authority, but you are required to report your earnings for the tax year to the Danish Tax Agency (Skat). You do this by preparing an annual financial statement, where you have calculated your figures based on the relevant accounting information from your bookkeeping.

The deadline for filing a tax return for sole proprietorships is July 1st. If you forget to enter your figures before the deadline, the Tax Agency will attempt to estimate your earnings. They don't always get it right, and if they don't, you could end up paying tax on money you never earned. It is therefore a very good idea to remember to file your business tax return so that you only pay tax on your actual earnings.